UnitedHealth Group is acquiring the northeast subsidiaries of Health Net Inc. for about $510 million, the companies announced late Monday.
The deal will bolster UnitedHealthcare's presence in Connecticut, New York and New Jersey, where it acquired Oxford Health Plans five years ago. Minnetonka-based UnitedHealth is already the nation's biggest health insurer by revenue.
The deal is expected to modestly boost both companies' earnings.
"For our members, this offers a very, very good alternative," said Jay Gellert, chief executive of Los Angeles-based Health Net. "We have confidence [UnitedHealth] will do first-rate by our members."
Health Net will retain its Arizona health plan and focus on its operations in the western United States.
The transaction is subject to regulatory approval and is expected to close within 12 months.
Health Net has 578,000 members in Connecticut, New York and New Jersey. Of those, 437,000 are risk-based commercial members, 35,000 are self-insured commercial members, 55,000 are Medicare Advantage members and 51,000 are Medicaid members. Health Net expects revenue of $2.7 billion for those operations.
"We have a long, successful history of serving people in the Northeast and are committed to responding to local market needs while also providing people with access to the innovative health care products, programs and technology applications of a company with a national scale," said Jeff Alter, chief executive of UnitedHealthcare for the Northeast.
UnitedHealth will pay Health Net $60 million for the Medicare and Medicaid businesses and renewal rights for the commercial membership. After the deal closes, UnitedHealth will transfer $290 million to Health Net, with another $160 million to be transferred over the next two years.
If all commercial members end up renewing policies with UnitedHealth, UnitedHealth could pay Health Net up to an additional $120 million.
UnitedHealth has been buying up smaller health plans for years as it sought to create a national footprint. One recent large acquisition, Sierra Health Services, Inc. for $2.6 billion, made it the dominant medical benefits provider in Nevada.
Last week, UnitedHealth won a three-year, $21.8 billion contract from the Defense Department to provide health benefits in the southern part of the country, beating Humana Inc. Health Net lost out in the northern region to Aetna Inc.
On Monday, Gellert noted that Health Net was "very disappointed" with the loss of that contract and had filed a protest with the Government Accountability Office.
Chen May Yee • 612-673-7434
